I'd like to start by acknowledging the traditional custodians on the land in which we are all meeting today and pay my respects to their elders past, present, and emerging. On behalf of the board and leadership team, I want to begin by recognizing the passion and the commitment of our Nido educators and team. Every day, they dedicate themselves to supporting children's learning, care, and safety. There is no more noble purpose. At the heart of Nido are the children we serve. It's both a privilege and a responsibility to play such an important role in their lives, and we're grateful to the families for the trust they place in us. Importantly, I want to acknowledge you, all of you on the call today, our shareholders and investors. Your investment in this sector matters.
It creates opportunities for children to thrive, enables families to achieve their goals, and helps secure a stronger future for the next generation of Australians. With your capital, confidence, and partnership, we're delivering on this aspiration together. Our purpose is clear: to create environments that support educators to rise and make a positive impact on children's lives. The first five years of life are not just important, they're decisive. They lay the foundation for every child's learning, well-being, and opportunity that follows. At Nido, we believe that when educators can leverage their talents and passions and skills with the right environments, tools, and support, their impact on children is profound. Whilst pursuing this purpose, we remain very focused on disciplined growth and committed to delivering sustainable long-term value for investors. Thank you for the opportunity to present to you all today. I really appreciate you dialing in.
My name is Adam Lai. I'm the CEO and now Executive Director at Nido Early School. I'm joined by three of our team: Nadia, our Head of Education and Professional Development; Tom Herring, our Chief Financial Officer; and Mathew Edwards, our Founder and Managing Director. As many of you know, in February, I had the privilege of joining the Nido family, a team that's worked together for many years with passion and dedication. I want to acknowledge and thank them for all they've achieved in this half. Now, today we're going to talk you through our service performance, the backdrop of the current and forward market, the evolution of our offering and investment in supporting capabilities, our pipeline for growth through incubation, and a summary of the year ahead. To summarize our half-year result, we've delivered an acceptable result in a challenging market.
We've demonstrated resilience and agility and made disciplined investments that position us well for growth. At Nido, everything begins with our educators, and their passion and commitment make it possible for us to serve children and families every day. Our educators are really the heart of our organization, and in the first half of this year alone, they've delivered more than 450,000 days of learning. Each one of those days represents not just care and education, but an investment in a child's future, trust from a family, and a contribution to the strength of our communities. That's really the foundation upon which all of these results and everything else really rests. In the first half, Nido has demonstrated resilience and agility. Nido's service EBITDA increased by 8% to $12.8 million, and we've maintained our EBITDA per service run rate of $229,000 on the prior comparable period.
This is to the backdrop of market headwinds. It's been a challenging period for the sector. Occupancy levels across the industry remain subdued, reflecting a combination of cost of living pressures on families, cyclical birth rate trends, shifts in working patterns, including remote and hybrid work, of course, and also increased supply in some locations. While occupancy was approximately 3% down on the prior comparable period on a like-for-like basis, we preserved our fee and realized sustainable productivity and efficiency improvements. Importantly, given the strength of our balance sheet, today we have announced we are paying a fully franked interim dividend of $0.015 per share without compromising our growth agenda. In this half, we've taken the opportunity and have continued to evolve our service offering, ensuring it remains responsive to the needs of children, families, and educators.
At the same time, we've strengthened our corporate and service support, investing in executive leadership, safety and compliance, marketing, brand, and our people, building upon the capability required to underpin sustainable growth going forward and looking ahead where we're positioned to expand our impact. We've built upon a strong foundation through the first half, and we're actively progressing a pipeline of more than 100 services. This gives us confidence in our ability to deliver sustained growth for Nido and, more importantly, to increase that positive impact that we had that I discussed earlier. In summary, we are navigating a challenging environment with discipline. We're investing with purpose, and we're building for the long term. With the continued support of our shareholders and the extraordinary commitment of our people, Nido is very well placed, both in its impact and also its value.
The 56 Nido-owned services have performed well through the first half. In summary, as mentioned, we've delivered a modest increase in revenue in the first half of 8% with a service EBITDA pre-ASB 16 of $12.8 million over the prior comparable period. We've held both EBITDA per service at $229,000 and our margin at 16%. Despite the challenge of occupancy across the sector, we have been able to deliver days of learning for the half of 453,000 against 460,000 last year. Now we maintain an average fee of $172 per day against an average of $157 this time last year, reflecting the investment and positioning of our service. In January 2025, we made the decision to hold and not increase average fees across all services, given the prevailing pressures on cost of living on Nido families. This decision was taken purposely and with consideration of the impact.
As a result of this decision, we did not realize approximately $3 million of revenue that would have had an impact on the bottom line. In July, we did increase fees within the allowable range of 4.4%, in line with the commitments for operators that have opted into the Worker Retention Grant. We've been able to improve our wage-to-revenue ratio from 59% to 57% through delivering improvements in the efficiencies in our practices. Notably, this has been realized through very careful management and also natural attrition. This result was delivered against the backdrop of a challenging sector in the first half. Anecdotal evidence suggests a softness in occupancy across the sector during the first half of this year, and our analysis indicates that this is a result of flat population growth, only modest increases in service usage, and an increase in new supply in some areas.
Today, around 22%-25% children aged zero to five receive the childcare subsidy for centre-based care. Nido responded to this challenge with a focus on brand and marketing initiatives, including the delivery of campaigns and building of capability. Secondly, as many Australians know, there's a significant focus on child safety and child protection in the community sector and government right now, particularly in the wake of the abhorrent crimes committed by a number of alleged perpetrators in long daycare settings. In the industry that we're in and the sector that we're in, we've seen firsthand the concerns of families right across the country as we engage with them to understand their perspectives and concerns, and we provide clarity on the safeguards we have at Nido to protect and keep their children safe.
We commend the recent work of Victoria Police and the government in identifying and arresting a perpetrator of serious crimes in Victoria. It's a matter on public record that the individual worked at a Nido service for an 18-day period before being terminated during his probation period. His termination related specifically to unsatisfactory retention to an incident report concerning a child's behavior towards another child. The action didn't relate to any behavior by the individual towards a child. Police have since uncovered, however, that the individual went on to commit appalling crimes post his employment at Nido. Child protection is always at the forefront of our work. While we should never need a reminder, this case really reinforces the need for constant vigilance. In this backdrop, we continue to focus on child safety and child protection in all we do as a major priority.
We're seeing encouraging signs of greater workforce stability across the sector, and this is reflected in our own experience at Nido. This stabilization is likely supported by the normalization of workforce movement following COVID, as well as meaningful increases in educator incomes, of course. Over the past few years, wages in the sector have risen by around 13% through award increases, with an additional 10% provided through the Worker Retention Plan for compliant operators such as Nido, and a further 5% increase still to come. This is a really positive trend. Retention greatly supports the maturing of practice, teaming, and forming relationships with children and families. In 2026, Australia's childcare landscape is poised for substantial transformation. Government policy will likely increase demand for days of learning. The Australian government currently provides childcare subsidy to families. The amount a family may receive is based on two tests.
Firstly, a means test based on their income, and secondly, on an activity test based on the hours they undertake approved work or study activity. From January 2026, the government will commence the three-day childcare subsidy guarantee, mandating that all families can now receive at least three days of subsidized early childhood education per child, regardless of their parents' work or study. These changes will increase demand, with over 100,000 families now being eligible for additional subsidy support from the government. We're expecting improvements in cost of living through interest rate cuts, lower inflation, and better employment statistics, which provide more favorable conditions going into FY 2026. Concurrently, child safety and protection reforms are gaining momentum across jurisdictions, as many of you would have read.
The recent high-profile abuse cases have spurred inquiries and recommendations, including establishing independent regulators, strengthening working with children's checks, introducing national registers of early childhood workers, mandating safety training, deploying CCTV trials, and increasing unannounced inspections. At the federal level, authorities are considering reforms to bolster regulatory oversight and tighten provider accountability. To be clear, Nido welcomes these reforms. Efforts to improve safety of children and operator compliance and quality across the sector are welcomed. We encourage governments to follow through with the coordinated reform across the regulatory landscape, including getting behind the national working with children's checks, the national educator registers, and a national reportable conduct scheme. We'll continue to focus and advocate for children's safety and protection as a priority.
It is to this backdrop that during the first half of the year, we've continued to evolve our service offering and also invest in our supporting capabilities. I'd love to hand to Nadia now, our Head of Education and Professional Development, to take us through some of the evolution of our offerings.
Thank you, Adam. Through the first half of FY 2025, we've invested in evolving our service offering. This year marked an exciting milestone for us with the launch of Nido' s kindergarten curriculum. Shaped by the voices of almost 1,000 children, families, educators, and community members over a three-year period, it represents a shared vision of meaningful learning and growth, aligned to the earliest learning framework and the Reggio Emilia philosophy. We know kindergarten is more than just the two years before school. It is a crucial milestone in early childhood that sets the foundation for future learning and well-being. Quality kindergarten has been shown to improve children's social, emotional, and cognitive development and creates a strong platform for lifelong learning.
By investing in this important stage, we are giving children the best possible start to their educational journey and paving the way not only for a successful transition into school, but greater opportunities in education and life beyond. Strong family partnerships are central to our philosophy at Nido . As part of our kindergarten offering, families are invited to parent-teacher interviews and receive a comprehensive summary of learning and development report twice a year. This really helps us to build stronger links between home and kindergarten, whilst individualizing each child's learning journey. To support educators in the implementation of the curriculum, we've developed a suite of practice guides with accompanying online learning modules and delivered a series of webinars in communities of practice to strengthen teacher capacity.
The development of our breakfast free offering is currently underway, and we're working with a group of leaders to align it with the kindergarten curriculum to create a seamless continuum of learning. In terms of our menu, we've also invested in developing an outstanding one created in partnership with a nutritionist after extensive feedback from our chefs, educators, and families. It has been assessed by a qualified dietitian to ensure every dish exceeds daily national targets for nutrition, whilst adhering to national food safety standards. This new menu is all about nutritious meals that children actually enjoy, supporting their growth, energy, and well-being. From varied proteins and flavors to allergy-friendly options, the menu has been designed to be balanced, inclusive, and full of goodness. During the first half of FY 2025, we've continued to invest in strengthening our risk and compliance capabilities.
This includes a review and continuous improvement of our policies and procedures in areas of child safeguarding, safety, people, and operational practice. Nid has a unique leadership model at each centre. An Executive Service Manager leads daily operations with vision and purpose. A Curriculum Leader guides curriculum implementation, coaches and mentors educators, and fosters collaboration between families and teams. A Family Advocate advocates for children and families and supports in the engagement and administration of families. These three roles work closely with our lead educators, cooks, educators, and broader support team. At Nido , we've developed a new design specification with one goal in mind: to create spaces that keep children safe, calm, and ready to learn.
The Reggio Emilia philosophy considers the environment as a third teacher, and that means that every detail of the space, the colors, layout, furniture, and flow isn't just background, it actively shapes how children feel and how they learn. Our new environments are designed to protect, inspire, and support children every day. In the second half of this year, we'll continue to build on this momentum and strengthen our practice. I'll hand back over to Adam Lai to provide an overview on support office costs.
Thanks very much, Nadia. Over the past year, we've made well-considered and disciplined investments into our corporate and support capabilities. We've made this investment conscious of it hitting our earnings during the period. The increase of $1.8 million in our support office costs during the reporting period represents an investment into being fit for growth. This investment includes executive leadership, education quality, and importantly, child safety and compliance. As Nadia mentioned throughout the beginning of the year, we invested in the education curriculum and meaningful improvements in safety, compliance, and quality. People, leadership and support, inquiry, generation, and brand. We are very comfortable with the investment in capability, and it sets us up very well for forward growth. I'll now hand back to Nadia to talk through some of the regulatory changes that we're seeing on the horizon.
Thank you. The government will introduce regulation to protect children and their safety. Reform will require both changes to operator practices and changes to the regulatory regime itself. Nido has a dedicated risk and compliance function that supports services to maintain compliance with emerging regulatory changes. The team scan and engage, continuously monitoring the regulatory landscape and engaging with relevant authorities to stay informed of emerging changes. Identify and assess change impact on service operations, implement changes to ensure compliance with regulations and best practice, monitor the effectiveness of initiatives by conducting audits on an ongoing basis, and continuously improve by using insights from monitoring and feedback to refine, strengthen, and enhance overall compliance culture. A number of the proposed changes to operator practices are already embedded at Nido .
These include CCTV present in all Nido-owned services yards, the use of personal electronic devices in classrooms already being banned, vaping already being banned within our services, and the voluntary adoption of the national model code for taking images and videos of children within our safeguarding children policies and procedures. The sector continues to evolve with ongoing regulatory changes, and we proactively monitor and implement strategies to ensure our services remain fully compliant. I'll now hand over to Tom Herring to take us through a summary of our group results.
Thanks, Nadia. Please note that the figures I refer to are all on a pre-AASB 16 basis and exclude non-cash costs. A reconciliation to the statutory results is in the appendix. Group revenue was $82.8 million. Group EBITDA was $6.6 million, and NPAT was $4.6 million. As Adam mentioned, we're really pleased to announce a fully franked interim dividend of $0.015 per share to be paid in September. We have a strong balance sheet with low leverage and debt capacity to acquire services from the incubator as they meet the acquisition metrics. As Adam touched on, service performance was solid in light of current conditions, being $0.8 million up on last year as a result of four acquisitions made in September 2024 and sustained performance of our existing services. The additional investment in our processes, people, and systems have increased net support office costs by $1.8 million to $6.2 million.
These factors result in an overall group EBITDA of $6.6 million. Depreciation of $0.4 million was similar to last year and reflects the low capital expenditure requirements in our business. Net finance costs of $0.2 million and tax expense of $1.4 million were broadly in line with the previous half, resulting in overall net profit after tax of $4.6 million. Turning to capital management, high cash generation and low leverage leaves us in a strong position as we look to continue to invest in growth.
Highlights include cash conversion of 97%, inclusive of Workers Retention Grants, which were received in July, $0.4 million worth of shares acquired as part of the share buyback program launched earlier in the year, net debt of $10.9 million at a net leverage ratio of 0.5x and we have $34 million of debt available, inclusive of the accordion facility that will be established when required.
Okay, we might now turn to incubation. Thanks, Tom. At Nido, we grow differently. We have the privilege of opening quality, purpose-built greenfield services that are designed to deliver safety, child protection, educational and social outcomes, and staff experience. Instead of taking on all the upfront risk of building new centers, we use what we call our incubation growth model. Here's how it works for those of you who haven't heard of it before. Private funds provide the capital and build the new service, while Nido designs them, manages them, and sets them up for success. We receive establishment and management fees during this period, but importantly, we don't carry the financial burden of development or early-stage losses. Once a center proves itself reaching strong occupancy and earnings targets, Nido has the option and the right to buy it at a set multiple.
By then, the center is already operating well with a culture and standard shaped by us from day one. As we've outlined to investors previously, growing through our incubator model provides us with a number of benefits. We support the design and development of new Nido-branded services owned by the incubator, providing development off balance sheet and limiting our exposure to trade-up risk, whilst maintaining the option and the right to acquire once certain conditions are met. When we open the services, we get a management fee. When we trade up and hit certain performance hurdles, we acquire the service. When we acquire the service, we get the benefit of acquiring at a reasonable multiple and having the full benefit of the profit from the service. The benefits are clear. It's capital efficient, we grow without stretching our balance sheet. It's lower risk, we only acquire once performance is proven.
It ensures quality because we've been in the driver's seat from design all the way through to operation, and it gives us a predictable pipeline of new services ready to come into the group at a predictable acquisition multiple. This model means that Nido can scale sustainably and with confidence, delivering value for our families, our people, and our shareholders. So far this year, we've opened five services in Clyde North, Mandogalup, Mandaras, Swannville, and Hilbert, with more to open this calendar year. These sites are wonderful and safe learning and development environments for children. They've been designed and developed to our specifications. I'll hand over to Nadia to talk through some of the features of those new services.
Our updated learning environments have been designed with one clear priority: keeping children safe while supporting their learning and well-being. First, safety is built into the design. We've removed sharp edges, introduced curved joinery, and set up clear sight lines so educators can always see and hear children. Rooms are equipped so staff don't have to leave to access resources, ensuring children remain supervised at all times. Second, the spaces are calm and inclusive. We've taken inspiration from the natural world using soft colors, simple layouts, and natural textures. This reduces overstimulation, helps children feel settled, and supports those with sensory sensitivities to engage confidently. Third, the environment itself supports learning while protecting children. Multi-purpose furniture is safe as well as functional. Lighting can be adjusted for comfort and focus, and open-ended materials allow exploration in a secure setting. The result is straightforward: environments that are safe, calm, and effective.
They make it easier for educators to supervise and support children, and they give children the freedom to learn and grow with confidence. I'll hand back to Adam now to talk through our platform for growth.
Thanks, Nadia. The incubation model has delivered reliable growth over the last year. The number of services we managed has increased from 99 in June 2024 to 107 today. We've opened five services in this year and will open an estimated five more by December 2025. We continue to make acquisitions, of course. We've made five acquisitions from the date the incubator started, including one last month in Taparu, as we outlined in our ASX announcement in July 2025. We're planning on making another three more acquisitions by the end of this year. We've got a strong pipeline to support our goal of acquiring 100 services out of the incubator over five years. We review over 100 sites per month and have over 100 being actively managed in our pipeline from opening through the negotiation.
We continue to seek opportunities in areas where children and families have demand and where supply is either limited or not meeting the needs of community. We remain disciplined in attempting to identify opportunities for sustained advantage over the long term with quite a rigorous selection process. Leading into next year, we're confident in the quality and management of a solid pipeline into FY 2026.
Thanks for your patience and your cooperation. On behalf of the Board and the leadership team, I want to thank you for listening to today's presentation. I would like to now open up for questions, and we have the facility here online for you to type those questions in should you wish to ask one. We've got a couple that have come through already, so I might start with the first one, if it's okay. This is the first question. As more of your early learning centers are being developed and brought into operation, are you expecting to see lower occupancy rates across the network? If so, how might this affect your overall occupancy? Do you have any strategies in place to address this challenge?
For example, are you considering adjustments to your pricing strategy, such as introducing more flexible payment models, regional pricing, or targeted promotions to help boost occupancy and attract more families? Thank you very much for that question. Increasing supply in the industry could be a challenge depending on the location of those services and that supply, the quality, and the choice in the area. Firstly, we found that one of the very best actions for driving enrollments and retention is quality, safety, and satisfaction of our current children and families. It's really important to always deliver upon the commitments that we make to those families because word of mouth in this industry has such a powerful impact.
Nido will continue to evolve how we communicate and market ourselves, and we do run targeted campaigns from time to time, including those marketing and pricing type offers that were implicit in the question. We're consistently reviewing how to improve those. At the same time, we do have the benefit at Nido of the incubation model, and we're very discerning with respect to where we locate those centers through there. We look for really sustained competitive advantage, and importantly, we're constantly analyzing the market and listening to parents to remain both responsive and get ahead of their needs. Thank you very much for that question. I've got another question here, and I'll quickly paraphrase this one. Regarding occupancy, another operator has seen conditions progressively deteriorate with their half-on average occupancy being challenged year on year. Are you experiencing the same thing? Are conditions better for you?
Have you noticed a pickup of inquiries since families seeking care have left their existing operators who have had failings of abuse? Thank you very much for that question. When we look at inquiries and enrollments this year, we've seen a couple of trends. First, from an inquiries perspective, we're seeing inquiries being quite similar to last year, and we're seeing some similar seasonal trends, which we find promising. From an enrollment perspective, conversions and converting those inquiries into enrollments has been more challenging. I think throughout that first half, we've seen a couple of things. Firstly, we've seen families visiting a greater number of services when they're trying to make a decision. Secondly, we're seeing families taking a little bit longer when making that decision, doing more research, asking more questions.
We completely understand why they're asking more questions to the backdrop of the points that were made in the, that were implicit in the question that was asked. We're seeing families asking more questions about safeguarding, child safety, and child protection. It's incumbent on us, obviously, to help give them confidence and answer those questions. Thank you very much. Seeing if any other questions are coming through. Quite a couple more minutes on this end. We just might wait a couple of minutes, if you don't mind, just to check if there are any other questions. Okay, I don't think we have any more questions now, so I really do deeply appreciate you all dialing in.
If we do get any more questions, we'll reach back out to those, and always feel free to reach out to the ir@nido.edu.au inbox if you do have any other questions as you review our results.
We do have a number of questions, but we can't access them at the moment. We'll respond to those directly.
Yeah, so we'll come back to you or ask any other questions on the IR inbox. Okay, so thank you very much for that. Look, just in summary, we are realistic about the challenges the sector has faced, and we're confident about where we stand. Our business has demonstrated resilience in a difficult environment. We've strengthened the foundations of our platform. As we enter the next half, we're quite confident. Pleasingly, we've been able to access the additional questions that have come through, and so we're going to be able to address some of those now. Okay, can you comment on the expectations for center openings and being acquired in FY 2026 and FY 2027? The occupancy trends in FY 2025 in the second half, and any guidance on the impact of rising compliance in terms of cost? Thanks very much for that question.
The comments on the expectations from opening centers were demonstrated on that slide. At the moment, we're seeing five more in the second half of 2025. Going into FY 2026 and beyond, we're seeing at least 19 opening. From there, we're able to, you know, through both development and also through those DA approvals. As we work through that over the next little while, we'll make that clear in our full-year results. The question about occupancy trends in the second half of 2025, as I've said before, we're seeing inquiries coming through as per last year, and we're seeing conversions a little bit more challenging this year. We're not speaking explicitly and giving explicit occupancy forecasts as we move into that second half. At the same time, we do appreciate that, you know, there is a little bit of seasonality that sometimes comes through towards the end of the year.
Last year, the industry didn't see that so much, and it'll be interesting to see how it goes this year. Moving into FY 2026, we're seeing those far more favorable conditions, which is great. Any guidance on the impact of rising compliance in terms of costs? We did outline some of those compliance and some of those regulatory changes that are coming through and the fact that Nido Early School is already compliant to some of that legislation that's coming in. At the same time, we are consistently reviewing the regulatory landscape and trying to get ahead of the curve from a compliance perspective. We've got no specific costings yet on what some of that compliance, what some of those compliance changes mean. We've got another question here. Do you plan on continuing the buyback as of today? Can you comment on your buyback going forward?
I might hand over to Tom to give us a bit of an answer on the buyback.
Yeah, thanks, Adam. As we said, the buyback's been successful with $400,000 worth of shares acquired in the first half. That continued into July until we paused with the blackout period. We will continue to monitor the opportunity through the buyback, and we'll continue with that to the extent that it makes sense for our shareholders.
Yeah, we'll be reviewing that over the next coming period. There's a question here about given the challenging market with suppressed occupancy, are you seeing any change in the time it takes for these new services, incubated services, to reach their performance hurdles for acquisition? We're very, very closely monitoring those. As I said before, we've got the privilege of being able to be quite discerning about the location in which they're put, and we analyze a number of different statistics to identify that a couple of things are true. Number one, that there are children there, given the number of license plates. We look at the competitor environment. We also look at the quality of other services that are in that environment. We have a level of confidence as we open up those services that they're going to trade up well.
We've also made some operational changes to better manage services as they open up. They give us a greater degree of confidence in their trade-up. At the moment, we're not seeing any specific challenges outside the normal challenges that we would in helping to market and communicate the opening of a new service and to get enrollments in those services. All right. I think that's it for questions for now. We deeply appreciate that. Please accept our apologies for that bit of a hiccup as we were waiting on those questions to come through. We really do appreciate your patience on that. In summary, most importantly, we provided more than 450,000 days of learning for children and their families. We've continued to evolve our service offering, and we've delivered that modest fee growth, expanded our pipeline, and strengthened our corporate capabilities during the period.
We're very realistic about the challenges the sector's faced, and we're confident about where we stand. Our focus remains, as I said before, on disciplined execution, sustainable growth, and long-term value creation. On behalf of the Board and the leadership team, I really want to thank our people for their commitment, our families for their trust, and our investors for their ongoing support. We look forward to updating you as we progress towards the end of the year. Thank you.